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The hegemon's dilemma: Great Britain, the United States, and the international economic order

Published online by Cambridge University Press:  22 May 2009

Arthur A. Stein
Arthur A. Stein
Affiliation:
Associate Professor of Political Science at the University of California, Los Angeles.
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Abstract

Liberal international trade regimes do not emerge from the policies of one state, even a hegemonic one. Trade liberalization among major trading states is, rather, the product of tariff bargains. Thus, hegemons need followers and must make concessions to obtain agreements. The liberal trade regimes that emerged in both the 19th and the 20th centuries were founded on asymmetric bargains that permitted discrimination, especially against the hegemon. The agreements that lowered tariff barriers led to freer trade not free trade; resulted in subsystemic rather than global orders; and legitimated mercantilistic and protectionist practices of exclusion and discrimination, and thus did not provide a collective good. Moreover, these trade agreements (and trade disputes as well) had inherently international political underpinnings and did not reflect economic interests alone. Trade liberalization also required a certain internal strength on the part of the government. Furthermore, only a complete political rupturing of relations, such as occurs in wartime, can destroy such a regime. A hegemon's decline cannot do so alone. These arguments are developed in a historical reassessment of the evolution of the international trading order since 1820. Eras commonly seen as liberal, such as the 1860s, are shown to have included a good deal of protection, and eras seen as protectionist, such as the 1880s, are shown to have been much more liberal than is usually believed.

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International Organization , Volume 38 , Issue 2 , Spring 1984 , pp. 355 - 386
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Copyright © The IO Foundation 1984

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References

The author gratefully acknowledges the extensive comments provided by Amy Davis, Peter Gourevitch, Roger Haydon, Robert Jervis, Peter Katzenstein, Robert Keohane, Stephen Krasner, George Modelski, and two anonymous referees. Earlier versions of this paper were presented at the 1981 annual meeting of the American Political Science Association and a 1981 meeting of the Politics Colloquium of the UCLA Department of Political Science. The author is grateful for the financial assistance of the UCLA Council on International and Comparative Studies and the UCLA Academic Senate. The author also thanks the Brookings Institution, where, as a Guest Scholar, he revised this paper.

1. Its major proponents are Kindleberger, Charles P., Gilpin, Robert, and Krasner, Stephen. For Kindleberger's arguments, see The World in Depression, 1929–1939 (Berkeley: University of California Press, 1973)Google Scholar, “Systems of International Economic Organization,” in Calleo, David P., ed., Money and the Coming World Order (New York: New York University Press, 1976)Google Scholar, and “Dominance and Leadership in the International Economy: Exploitation, Public Goods, and Free Rides,” International Studies Quarterly 25 (06 1981): 242–54CrossRefGoogle Scholar. For Gilpin's arguments, see U.S. Power and the Multinational Corporation: The Political Economy of Foreign Direct Investment (New York: Basic Books, 1975)Google Scholar, and “Economic Interdependence and National Security in Historical Perspective,” in Knorr, Klaus and Trager, Frank N., eds., Economic Issues and National Security (Lawrence: Regents Press of Kansas, 1977), pp. 19–66Google Scholar. Also see Krasner, , “State Power and the Structure of International Trade,” World Politics 28 (04 1976): 317–47CrossRefGoogle Scholar. Robert Keohane coined the phrase now in common use in his application of their work to three current issues; see “The Theory of Hegemonic Stability and Changes in International Economic Regimes, 1967–1977,” in Holsti, Ole R., Siverson, Randolph M., and George, Alexander, eds., Change in the International System (Boulder, Colo.: Westview Press, 1980)Google Scholar.

2. It bears some resemblance to A. F. K. Organski's “power transition.” Organski disagrees with most international relations theorists and argues that an imbalance of power (i.e., a system with a hegemonic power) is more stable and peaceful than one with a true balance of power. Curiously, most international political economists are unaware of Organski's work. See Organski, , World Politics, 2d ed. (New York: Knopf, 1968)Google Scholar, and Organski, and Kugler, Jacek, The War Ledger (Chicago: University of Chicago Press, 1980)Google Scholar. It also resembles George Modelski's “long cycles,” which Modelski has applied to explain international economic as well as political orders. See Modelski, , “The Long Cycle of Global Politics and the Nation-State,” Comparative Studies in Society and History 20 (04 1978): 214–35CrossRefGoogle Scholar, and “Long Cycles and the Strategy of U.S. International Economic Policy,” in Avery, William P. and Rapkin, David P., eds., America in a Changing World Political Economy (New York: Longman, 1982)Google Scholar.

3. In “Systems” and “Dominance and Leadership,” he argues that even hegemony is subject to entropy and, therefore, unstable.

4. Kindleberger's, “The Rise of Free Trade in Western Europe, 1820–1875,” Journal of Economic History 35 (03 1975): 20–55CrossRefGoogle Scholar, is an exception; its implicit argument is quite at odds with his general thesis. The point is made by Ruggie, John Gerard, “International Regimes, Transactions, and Change: Embedded Liberalism in the Postwar Economic Order,” International Organization 36 (Spring 1982): 385CrossRefGoogle Scholar.

5. Gilpin draws on the collective goods argument yet believes that only the most efficient nation finds open markets in its interest. Lake, David points out that Gilpin must mean relative productivity rather than efficiency, in “International Economic Structures and American Foreign Economic Policy, 1887–1934,” World Politics 35 (07 1983): 517–43CrossRefGoogle Scholar.

6. This point is made by McKeown, Timothy J., “Hegemonic Stability and 19th Century Tariff Levels in Europe,” International Organization 37 (Winter 1983): 73–91CrossRefGoogle Scholar.

7. Openness is typically measured by trade flows, liberalization by tariff rates and tariff legislation. The interrelationships among the indicators and the concepts themselves are usually not assessed. These indicators are not always coincident and neither are the constructs. This article, however, is not the place to discuss these issues.

8. Several explanations attempt to deal with these empirical problems. None provides complete alternative explanations for the creation, maintenance, and decline of liberal trade regimes; they address only their decline. Timothy McKeown, for example, sketches a “political business cycle” explanation for foreign economic policies. The theory can explain closure during a hegemon's dominance but cannot explain why (or how) a hegemon pursues openness during good times. A similarly problematic example is the “surplus capacity” explanation of Peter F. Cowhey and Edward Long, who apply the hegemonic stability argument to a specific sector, the automobile industry. But it is not clear that the theory should be seen in sector-specific terms, nor that surplus capacity is independent of hegemonic decline. See Cowhey, and Long, , “Testing Theories of Regime Change: Hegemonic Decline or Surplus Capacity?” International Organization 37 (Spring 1983): 157–88CrossRefGoogle Scholar.

9. Lake, “International Economic Structures,” argues that medium-size states with high productivity will support a liberal regime, but that medium-size states with low productivity will act as spoilers. He goes on to describe the fitful movement toward lower tariffs by the United States during the latter 19th century and the early 20th. Lake characterizes the United States as a “supporter” of the liberal trade regime, but it never became part of that regime in the 19th century, and it did not adopt an unconditional most-favored-nation clause, which was at the heart of that regime, until the early 1920s. Indeed, the United States continually sought exclusive favors. Often it not only insisted that negotiated concessions were not subject to most-favorednation treatment but also refused to allow other countries to generalize the concessions they had granted to it. By Lake's criteria, France and Germany were “spoilers” throughout the latter 19th century; thus he cannot explain any liberalization among the major European trading states during this period. His argument regarding France and German policy would neither square with the interpretation offered below nor with the standard interpretation of a shift in French and German policy in the 1880s and 1890s.

10. International regimes emerge not from the actions of one power, even a hegemonic one, but from the interactions of major powers, even if they are not even roughly equal in power. Strategic interaction is as important in a hegemonic system as in a balance-of-power one.

11. However, one can argue that subsystemic trade liberalization provides a global collective good in its effect on general economic conditions, for the growth in global trade triggered by trade liberalization is likely to spill over and include nonsignatories.

12. Compare this view of a hegemon's interest with that presented by Krasner, “State Power.” The ability to extract resources directly from the society may be only one element of internal state strength. Even a state that can afford free trade may be able neither to persuade certain societal elements to accept free trade nor to impose it upon them. For an analysis that uses state strength relative to the society to explain commercial policy, see Krasner, Stephen D., “U.S. Commercial and Monetary Policy: Unravelling the Paradox of External Strength and Internal Weakness,” International Organization 31 (Autumn 1977): 635–71CrossRefGoogle Scholar.

13. Indeed, Kenneth Fielden argues that “the British tariff of 1815 was harsher than the eighteenth century's.” See Fielden, , “The Rise and Fall of Free Trade,” in Bartlett, C. J., ed., Britain Pre-eminent: Studies of British World Influence in the Nineteenth Century (New York: St. Martin's Press, 1969), p. 81Google Scholar.

14. For a fascinating history, see Jeremy, David J., “Damming the Flood: British Government Efforts to Check the Outflow of Technicians and Machinery, 1780–1943,” Business History Review 51 (Spring 1977): 1–34CrossRefGoogle Scholar.

15. Imlah, Albert H., Economic Elements in the Pax Britannica: Studies in British Foreign Trade in the Nineteenth Century (Cambridge: Harvard University Press, 1958), p. 14CrossRefGoogle Scholar.

16. Iliasu, A. A., “The Cobden-Chevalier Commercial Treaty of 1860,” Historical Journal 14 (03 1971): 69CrossRefGoogle Scholar.

17. Ratcliffe, Barrie M., “Great Britain and Tariff Reform in France, 1831–36,” in Chaloner, W. H. and Ratcliffe, , eds., Trade and Transport: Essays in Economic History in Honour of T. S. Willan (Manchester: Manchester University Press, 1977)Google Scholar. Other nations perceived a British strategy to prevent them from industrializing and were thus quite wary; see Cain, P. J. and Hopkins, A. G., “The Political Economy of British Expansion Overseas, 1750–1914,” Economic History Review, 2d ser., 33 (11 1980): 477Google Scholar. For the limited impact of the reciprocity treaties that Britain did sign in the mid 1820s, see Iliasu, “Cobden-Chevalier Commercial Treaty.”

18. Mathias, Peter, The First Industrial Nation: An Economic History of Britain 1700–1914 (London: Methuen, 1969), p. 300Google Scholar.

19. Fiscal concerns were prominent in the unsuccessful campaigns from 1900 to 1914 for tariff reform in Britain. Revenue needs increased by the Boer War led to the temporary reimposition of agricultural duties. The prewar Liberal government introduced new economic and social programs, and tariff reformers advocated duties to generate the necessary revenue. SeeCain, Peter, “Political Economy in Edwardian England: The Tariff-Reform Controversy,” in O'Day, Alan, ed., The Edwardian Age: Conflict and Stability, 1900–1914 (Hamden, Conn.: Archon, 1979)Google Scholar; and Eichengreen, Barry J., “The Eternal Fiscal Question: Free Trade and Protection in Britain, 1860–1929,” Harvard Institute for Economic Research Discussion Paper no. 949 (Cambridge, Mass., 12 1982)Google Scholar.

20. American reliance on customs revenue was dramatically reduced by the institution of the income tax in 1913 and, therefore, did not constrain American initiatives in the 1930s. In the 19th century, the tariff was usually the major source of federal revenue; see Isaacs, Asher, International Trade: Tariff and Commercial Policies (Chicago: Richard D. Irwin, 1948), pp. 283–85Google Scholar. Import duties remain an important source of central government revenue for many nations. An analysis of 94 countries (excluding the OECD nations) shows that in 1970, 10 depended on customs for 10% or less of total government revenue, 15 depended on customs for 11–20%, 21 for 21–30%, 22 for 31–40%, 13 for 41–50%, 9 for 51–60%, and 4 for 61% or more. Those least dependent on duties were primarily oil-producing countries, which relied largely on royalties instead. For non-oil LDCs, government reliance on customs represents a major impediment to liberalization. (Figures calculated from data provided by the Inter-University Consortium for Political and Social Research, Cross-National Socio-Economic Time Series, 1950–1975 [ICPSR 7592]).

21. A hegemon can impose free trade on weak states. Britain forced its way into Turkey in 1838 and finally opened China in 1842. See Greenberg, Michael, British Trade and the Opening of China 1800–42 (Cambridge: Cambridge University Press, 1951)Google Scholar. This is part of what I take to be the “imperialism of free trade”; see Gallagher, John and Robinson, Ronald, “The Imperialism of Free Trade,” Economic History Review, 2d ser., 6 (1953): 1–15CrossRefGoogle Scholar. An interesting recent discussion links British expansionism with the course of British modernization: Cain and Hopkins, “Political Economy of British Expansion.” The trade agreements forced on small countries were often asymmetrical ones that did not entail mutual liberalization, however; these “Capitulations” often included extraterritoriality clauses as well. The British could not even impose free trade on their colonies. When the British lifted commercial restrictions on trade with the colonies, the colonies were free to choose their own trade policies. Some picked free trade, others opted for protective tariffs.

22. Haight, Frank Arnold, A History of French Commercial Policies (New York: Macmillan, 1941), p. 36Google Scholar.

23. Britain and France both departed from their past practices in signing the 1860 agreement, and they did so for political reasons. See lliasu, “Cobden-Chevalier Commercial Treaty,” and Ratcliffe, Barrie M., “The Origins of the Anglo-French Commercial Treaty of 1860: A Reassessment,” in Ratcliffe, , ed., Great Britain and Her World, 1759–1914: Essays in Honour of W. O. Henderson (Manchester: Manchester University Press, 1975)Google Scholar, and Ratcliffe, , “Napoleon III and the Anglo-French Commercial Treaty of 1860: A Reconsideration,” Journal of European Economic History 2 (1973): 582–613Google Scholar.

24. Hobson, J. A., Richard Cobden: The International Man (New York: Henry Holt, 1919), p. 244Google Scholar. Emphasized there.

25. See Ratclifle, , “Great Britain and Tariff Reform in France, and his “The Tariff Reform Campaign in France, 1831–1836,” Journal of European Economic History 7 (Spring 1978): 61–138Google Scholar. Attempts to create customs unions have historically also had political motivations and repercussions. A good starting point is Fritz Machlup, A History of Thought on Economic Integration (New York: Columbia University Press, 1977)Google Scholar. Obviously, political unification requires an economic unity that minimally requires the absence of internal barriers to trade; not surprisingly, the U.S. Constitution forbids individual states from imposing “any imposts or duties on imports and exports.”

26. Haight, , History of French Commercial Policies, pp. 32–33Google Scholar.

27. Fielden, , “Rise and Fall of Free Trade,” p. 89Google Scholar; and Rist, Marcel, “A French Experiment with Free Trade: The Treaty of 1860,” in Cameron, Rondo, ed., Essays in French Economic History (Homewood, III.: Richard D. Irwin, 1970), p. 289Google Scholar.

28. Succinctly demonstrated by Cain, , “Political Economy in Edwardian England,” pp. 36–38Google Scholar. For the most extensive recent work on the British decline, called the British climacteric, see Lewis, W. Arthur, Growth and Fluctuations, 1870–1913 (London: Allen & Unwin, 1978)Google Scholar, chap. 5. A sector-specific analysis of this decline is Allen, Robert C., “International Competition in Iron and Steel, 1850–1913,” Journal of Economic History 39 (12 1979): 911–37CrossRefGoogle Scholar.

29. The most recent data set is provided by Bairoch, Paul, “Europe's Gross National Product: 1800–1975,” Journal of European Economic History 5 (Autumn 1976): 273–340Google Scholar. Bairoch assesses average annual European GNP growth as 2% between 1842–44 and 1867–69, 1% between 1867–69 and 1889–91, and 2.4% between 1889–91 and 1913. These figures are significantly lower than those provided by Maddison, Angus, “Growth and Fluctuation in the World Economy, 1870–1960,” Banco Nazionale del Lavoro Quarterly Review 15 (06 1962): 127–95Google Scholar. Maddison places average European growth at 2.2% between 1870 and 1890 and at 2.1% between 1890 and 1913. Both authors show that the average growth in trade exceeded that of GNP. For Bairoch's, trade figures see his “European Foreign Trade in the XIX Century: The Development of the Value and Volume of Export (Preliminary Results),” Journal of European Economic History 2 (Spring 1973): 5–36Google Scholar. He calculates the average growth in exports as 5% between 1846–47 and 1865–68, as 5% between 1896–97 and 1913.

30. The liberal trade regime of the 1860s was based on a network of states linked by trade agreements containing unconditional most-favored-nation clauses. Thus, to argue that this regime collapsed requires evidence that a state in the network took protectionist measures aimed at others within the network. Increased tariffs on agricultural goods provide no such evidence. Most scholars attribute declining European growth rates to the flooding of European markets by cheap American and Russian wheat. The response in many European states was higher agricultural duties, but mostly aimed at states with whom most European states had no trade agreements (i.e., the United States).

31. For the underlying bargaining purposes of tariff legislation, see Isaacs, , International Trade, pp. 336, 347–48Google Scholar.

32. France's original move away from prohibitionism in the 1860s had greater staying power than many suggest; see Smith, Michael S., “Free Trade Versus Protection in the Early Third Republic: Economic Interests, Tariff Policy, and the Making of the Republican Synthesis,” French Historical Studies 10 (Autumn 1977): 293–314CrossRefGoogle Scholar, and Smith, , “The Free Trade Revolution Reconsidered: Economic Interests and the Making of French Tariff Policy under the Second Empire,” Proceedings of the Annual Meeting of the Western Society for French History 6 (1978): 327–35Google Scholar. Even in the early 1870s, when the new Third Republic was saddled with indemnity payments to Germany, attempts to use tariffs to generate revenue were rebuffed (this was the reason for the resignation of Thiers, the president of the Republic, in 1873).

33. Smith, Michael Stephen, Tariff Reform in France, 1860–1900: The Politics of Economic Interest (Ithaca: Cornell University Press, 1980), p. 188Google Scholar.

34. France even negotiated some treaties that stipulated duties lower than the legislatively mandated minimum; see Smith, , Tariff Reform in France, p. 209Google Scholar. The maximum rates continued to apply only to Portuguese goods throughout the entire period of the Meline Tariff. Other nations each paid those rates only for short periods of time while negotiating new trade agreements with France. The French tariff war with Switzerland resulted in part from the latter's refusal to grant most-favored-nation status merely in return for a legislated minimum tariff. The Swiss maintained that they would grant such status only in a negotiated agreement and insisted in some cases on rates lower than the minimum.

35. Henderson, W. O., The Rise of German Industrial Power 1834–1914 (Berkeley: University of California Press, 1975), p. 220Google Scholar.

36. The German Tariff Act of 1879 was not just the product of the marriage of iron and rye. It also resulted from the political leadership of the newly unified German nation needing an independent source of revenue. As Bismarck told the Reichstag in 1872, “An empire that is dependent upon the contributions of individual states lacks the bonds of a strong and common financial institution” (Henderson, , Rise of German Industrial Power, p. 219)Google Scholar. Bismarck supported higher duties in order to generate more central government revenues directly (see Table 1). Thus, the state's fiscal needs combined with protectionist interests to increase German tariffs, though only to moderate levels.

37. They became part of the German customs union in 1906. The impact of duties on specific industries has been overstated. Germany was not keeping out goods to protect weak domestic industries: it exported 19% of iron and steel production in 1879, and “German costs were clearly low enough for the iron and steel industry to compete at world prices” (Allen, , “International Competition,” p. 928)Google Scholar.

38. Culbertson, W. S., “Commercial Treaties,” in Encyclopedia of the Social Sciences, vol. 4 (New York: Macmillan, 1931), p. 29Google Scholar.

39. Some also had political overtones. The French-Italian tariff war was not unrelated to French unhappiness with Italy's alliance with Germany and Austria. A model of tariff wars is developed by Nicholson, Michael, “Tariff Wars and a Model of Conflict,” Journal of Peace Research 4 (1967): 27–38CrossRefGoogle Scholar. An important source is Reports on Tariff Wars between Certain European States (London: HMSO, 1904)Google Scholar. As these tariff wars demonstrate, commercial policy can reflect the international political needs of the state, and commercial agreements, such as the Cobden-Chevalier Treaty, often have similar political underpinnings. As argued in the text, commercial policy may also reflect the state's fiscal needs. Commercial policy is thus more than the mere expression of different domestic economic interests. For examples of that argument, see Kindleberger, Charles P., “Group Behavior and International Trade,” Journal of Political Economy 59 (1951): 30–47CrossRefGoogle Scholar; and Gourevitch, Peter A., “International Trade, Domestic Coalitions, and Liberty: Comparative Responses to the Crises of 1873–1896,” Journal of Interdisciplinary History 8 (Autumn 1977): 281–313CrossRefGoogle Scholar.

40. Such levels would not be seen again until the early 1970s. See Rosecrance, Richard and Stein, Arthur, “Interdependence: Myth or Reality?” World Politics 26 (10 1973): 1–27CrossRefGoogle Scholar.

41. Isaacs, International Trade.

42. Indeed, one legacy of war is greater state involvement in economy and society. See Stein, Arthur A., The Nation at War (Baltimore: Johns Hopkins University Press, 1980)Google Scholar.

43. Germany had every incentive to restrict imports and attempt to run regular balance-of-trade surpluses in order to pay for its war debt.

44. Benham, F., Great Britain under Protection (New York: Macmillan, 1941)Google Scholar.

45. Kottman, Richard N., Reciprocity and the North Atlantic Triangle, 1932–1938 (Ithaca: Cornell University Press, 1968)Google Scholar. For an aggregate analysis of commercial policy during the 1930s, see Snyder, Richard C., Commercial Policy as Reflected in Treaties from 1931 to 1939,” American Economic Review 30 (12 1940): 787–802Google Scholar.

46. For a discussion of the impact of European noncooperation on Roosevelt's economic policies, see Moore, James R., “Sources of New Deal Economic Policy: The International Dimension,” Journal of American History 61, 3 (1974): 728–44CrossRefGoogle Scholar. Not until 1923 did the United States accept the unconditional most-favored-nation clause, see Pregelj, Vladimir N., “‘Most-Favored-Nation’ Principle: Definition, Brief History, and Use by the United States,” in Studies in Taxation, Public Finance and Related Subjects: A Compendium, vol. 2 (Washington, D.C.: Fund for Public Policy Research, 1978)Google Scholar.

47. Kottman, , Reciprocity, p. 72Google Scholar. See also Lang, I., “The Conflict between American and British Commercial Policies prior to World War II,” Acta Historica 25 (1979): 267–96Google Scholar.

48. Lowering trade barriers requires a domestic institutional arrangement to insulate executive power from particularistic societal interests. See Hody, Cynthia, “From Protectionism to Free Trade: The Politics of Trade Policy” (Ph.D. diss., University of California, Los Angeles, in progress)Google Scholar.

49. For a discussion of political considerations underpinning American-British trade discussions in the mid 1930s, see Schatz, Arthur W., “The Anglo-American Trade Agreement and Cordell Hull's Search for Peace 1936–1938,” Journal of American History 57 (06 1970): 85–103CrossRefGoogle Scholar.

50. Winston Churchill called Lend-Lease “the most unsordid act” for precisely this reason. Indeed, Imperial preferences were the only point of major disagreement between the United States and Great Britain in drafting the Atlantic Charter. See Gardner, Lloyd C., Economic Aspects of New Deal Diplomacy (Boston: Beacon Press, 1964)Google Scholar. For British Labour's commitment to Imperial preference, see Davis, Amy E., “The Foreign Policy of British Labour Party Leaders: Postwar Planning, Continuity of Foreign Policy, and the Origins of the Cold War, 1939–1946” (Honors Thesis, Cornell University, 1974)Google Scholar.

51. Kolko, Gabriel, The Politics of War: The World and United States Foreign Policy, 1943–1945 (New York: Random House, 1968)Google Scholar.

52. The United States also had preferences, which were grandfathered in these agreements. The United States had given preferences to Cuba in 1903 and to the Philippines in 1946 upon granting each their independence. The United States was allowed to retain these preferences.

53. Hieronymi, Otto, Economic Discrimination against the United States in Western Europe (1945–1958): Dollar Shortage and the Rise of Regionalism (Geneva: Droz, 1973)Google Scholar.

54. The United States has even been prepared to tolerate cheating on the already asymmetrical bargain it had accepted and has rarely resorted to its right to retaliate. A sense of the extent to which the United States has turned the other cheek can be seen in Goldstein, Judith Lynn, “A Re-examination of American Trade Policy: An Inquiry into the Causes of Protectionism” (Ph.D.diss., University of California, Los Angeles, 1983)Google Scholar.

55. On the nature of these stillborn organizations, see Bronz, George, “The International Trade Organization Charter,” Harvard Law Review 62 (05 1949): 1089–1125CrossRefGoogle Scholar, and Bronz, , “An International Trade Organization: The Second Attempt,” Harvard Law Review 69 (01 1956): 440–82CrossRefGoogle Scholar. For the problems in drafting a charter for such an organization, see Viner, Jacob, “Conflicts of Principle in Drafting a Trade Charter,” Foreign Affairs 25 (07 1947): 612–28CrossRefGoogle Scholar. Viner points out the extent to which the United States could not fully accept free trade. The ITO was opposed in the United States not only by protectionists but by perfectionists who felt that it accepted too much protectionism; see Diebold, William Jr, “The End of the I.T.O.,” Princeton Essays in International Finance no. 16 (Princeton, N.J., 10 1952)Google Scholar. The ITO charter institutionalized the subsystemic nature of the hoped-for liberal regime. It specified that member countries were not permitted to generalize concessions to nonmembers.

56. For an important corrective to the prevalent view that government policy has been successful in this role, see Tipton, Frank B. Jr, “Government Policy and Economic Development in Germany and Japan: A Skeptical Reevaluation,” Journal of Economic History 41 (03 1981): 139–50CrossRefGoogle Scholar.

57. This is what I take to be, at bottom, the argument made by Ruggie, “International Regimes, Transactions, and Change.” This argument is also used to explain current trade concerns in Stein, Arthur A., “Freer Trade: Problems and Prospects,” manuscript (1983)Google Scholar. Yet it is inappropriate to impose modern motivations and concerns upon past generations. Barry J. Eichengreen points out that the British decision to adopt the General Tariff in 1932 was primarily motivated by a concern not about unemployment but about hyperinflation and exchange depreciation. Politicians adopted the tariff knowing it would worsen domestic unemployment, but deeming the price acceptable for price and exchange-rate stability. See Eichengreen, , “Sterling and the Tariff, 1929–32,” Princeton Studies in International Finance no. 48 (Princeton, N.J., 09 1981)Google Scholar.

58. Krasner, Stephen D., “The Tokyo Round: Particularistic Interests and Prospects for Stability in the Global Trading System,” International Studies Quarterly 23 (12 1979): 491–531CrossRefGoogle Scholar.

59. A dominant strategy is one that maximizes returns no matter the course of action taken by others. It is deductively true that a situation in which one course of action is dominant for one decision criterion but another is dominant for the other decision criterion is one in which the hegemon has a greater effect on others' returns than on its own. Choosing to maximize its absolute returns means that others will gain more and, therefore, that the hegemon undercuts its relative position. Choosing to maximize its relative returns, on the other hand, means that the hegemon gives up the possibility of greater absolute wealth.

60. Cain, “Political Economy in Edwardian England,” argues that the tariff-reform strategy would have been an inappropriate one for Britain's problems.

61. Such reciprocal agreements are likely to be formal and institutionalized. When a hegemonbears the burden, the arrangement can be tacit, but a more reciprocal arrangement between relatively more equal powers requires explicit collaboration. These distinctions are developed in Stein, Arthur A., “Coordination and Collaboration: Regimes in an Anarchic World,” International Organization 36 (Spring 1982): 299–324CrossRefGoogle Scholar.